The boss of Taylor Wimpey, one of Britain's biggest housebuilders, has said
the housing market could absorb a rise in interest rates this year without a
recovery being impacted.

House prices and sales volume have risen over the past few months and this could be sustained through a rise in interest rates this year by the Bank of England of up to half a percentage point, according to Pete Redfern, chief executive of Taylor Wimpey,

Central banks and governments across the world are beginning to consider exit strategies from the stimuli used to prop up the global economy, but some economists fear that a premature rise ininterest rates will halt an upturn by squeezing consumer spending.

However, Mr Redfern said that with many UK homeowners on fixed-rate mortgages signed before the financial crisis, a rise in interest rates was priced in and the threat of forced sales flooding the market was questionable. He did though, accept the impact of interest rates rising back to pre-crisis levels from their historical low of 0.5pc would be "all about timing" and easier to deal with later in the year.

Mr Redfern added: "Obviously in the short term we would not like to see a rise in interest rates."

The Taylor Wimpey boss's optimism was driven by his company reporting that forward orders for 2010 in the UK are 28pc ahead of 2009. In a year-end trading update, the business also reported that its average selling price rose from £153,000 to £160,000, aided by an increasing company focus on houses over flats. Taylor Wimpey's North American arm enjoyed a "prolonged period of stability".

The improvements in the market helped the housebuilder to drive down its debt to £750m from £1.5bn through last year, with the bulk of this reduction through a £510m cash-call.

However, Taylor Wimpey's update highlighted the fragility of the UK housing market.

The company sold only 10,186 homes in 2009, 24pc lower than the previous year, and Mr Redfern expects 2010 to be "broadly similar", with the constrained supply of homes underpinning a market with historically limited demand. The year would be about "not pushing the business too hard", but pushing margins hard, he explained.

"Current market conditions are stable, with supply remaining restricted and demand solid," Mr Redfern said. "However, the risks of further weakness in the wider economy and reduced mortgage availability remain."

The Taylor Wimpey chief executive refused to rule out the sale of the company's Spanish or North American business, but said there was "no active process" at present.

The company's shares fell 0.93 to 40.71p in afternoon trading. Analysts at Panmure Gordon said they were concerned about the company's ability to buy land to build on, adding: "We believe that it does not have the capacity to grow its landbank like other housebuilders."